Friday, November 5, 2010

Olympic Village Update

Lots of media coverage today on the Olympic Village. There are two stories: one relates to a last minute Vancouver City Council decision last night to lease one of the three social housing/market rental housing projects to a soon to be created entity under the auspices of the Coop Housing Federation (CHF), and appoint another arm of the CHF as interim operators of the other two parcels.

The other story relates to the sale of the market condominiums. Frances Bula writes in the Globe and Mail that the city is refusing to approve the revised pricing schedule, prepared by Bob Rennie and Millennium, until Millennium posts more equity as security.

So what do these stories really mean?

First the social and rental housing. The 252 units cost $110 million excluding land. While I suggested it made sense to sell these units, and make a profit of between $25 and $68 million, (according to the city staff report), to be used to fund other social housing, rather than subsidize them to the tune of $64.1 million, in April Council voted to keep the units as affordable and rental housing. With assistance from BC Housing, the City issued a call for proposals to take over and manage these units. However, only three bids were received and all were rejected by the Province, which was being asked to guarantee the financing for the operators. As a result, six months after the Olympics, the units are all vacant.

The only organization to submit a bid for all three parcels was the Portland Hotel Society, a very capable organization which historically provides housing and services for the 'hard to house' in the Downtown Eastside. Jim Green and many others were advocating that this group be selected by the city to manage the units. I was concerned that if PHS was selected, it could have negative impacts on the value of the unsold condominium units.

Last night Council decided to enter into a lease with a new entity, to be created by the CHF for one of the three projects, rather than the PHS. However, the City also agreed to write down the cost of these units substantially, and to guarantee the financing. While CHF is a better choice than PHS, it seems a shame to be heavily subsidizing the cost of these units, three quarters of which will be 'rented' at market, when they could have been sold. While I am disappointed the units won't be sold, I do have confidence in the CHF to fill up and manage the project in a responsible manner. It will fill up and manage the units for up to two years until the city can find a permanent operator, most likely through another Call for Proposals.

The Condominium Units The bigger story is what is going to happen to the condominium units? Everyone agrees that the prices established by the developer and his marketing team, at levels sufficient to repay the city's loan, are too high for the marketplace. After six months, I'm told that less than 40 units have been sold. Bob Rennie wanted to put in place 'momentum pricing' in order to get sales started, on the expectation that prices could be raised over time. This was the right thing to do. However, since the city is now the lender, it had to approve any price reductions, and it won't. That's right, it won't since it wants assurance that any shortfalls will be covered by the developer....up front. Since the projected shortfall could be in the hundreds of millions, the city is looking for substantial 'security'....either cash or other properties.

However, while I do not know the developer's corporate and personal financial situation, it is unlikely that he can or will put up a lot more money or security at this stage. So, as Frances Bula notes, there's a stand-off. Meanwhile, Millennium is apparently obligated to make another $75 million payment in January.

My prediction? Given all the publicity surrounding the fact that the prices are too high, and the city's decision on the social and rental housing, I suspect that there will not be a lot of sales in the coming months (unless prices are reduced). As a result, the city will take back the project from the developer in the new year, and then what?

Well, I am told that City staff have had discussions with at least one other developer to see if he's interested in buying the project as a block. The problem with this is that the price could well be below the loan amount, and everyone will know just how much the City is losing. I therefore suspect that a more likely scenario is that the majority (or perhaps all) of the units will be rented out...yes, rented out. This way, no one will really know just how much we are losing since we can say that we'll make a big profit on their sale in ten years. And indeed, we might. But my analysis suggests that the monthly losses (since the rents may cover only a third to half of the costs), and the loss of property taxes, etc. will cost the city hundreds of millions for the next ten years.

Will this affect our taxes? Only indirectly, since all the money will likely come out of the Property Endowment Fund..it will likely affect our credit rating, but the losses won't come out of operating budgets. But considering that the city was hoping to get another $173 million from the developer to cover the costs of the shoreline works, parks, community centre, daycare, plaza, etc....the reductions in the Property Endowment Fund will be very, very significant.

A final comment. One of the main financial objections by city staff to my proposal to sell the social/rental housing was that this might compromise the sale of the market units. The mayor also questioned whether there was a market for these units. Meanwhile, Peter Wall has just sold 280 units at prices comparable to what I was proposing for these units...(yes I know these are pre-sales, but....) and at the end of the day, there is a good chance the market units will not be sold! Another irony.

108 comments:

Michael, as I said on Frances Bula's site, I agree that selling some or all of the city owned rental units will not thwart sale of market condos. As I type, I am looking directly at these empty buildings, right across from the OV market rental where I live. These units are nowhere near comparable in quality: much lower grade finishings, small balconies, more modest (although still very pleasant) common amenities. It's a completely different customer, especially if it was leased land, a formula for affordability that has worked very well at "old" South False Creek.

I truly believe some or all would actually energize the community, making it more attractive to the higher end buyers.

Yesterday, we took our 3 year old grandson over to the courtyard of one of these empty buildings to play on a giant tube slide. He had a total blast. We hope next time we visit the slide, there will be other kids there too.

Disappointed to hear the incentives for for-sale units have been delayed again. How long can Rennie's people keep potential buyers dangling?

Heather, thanks for your thoughtful comments. While I am disappointed the units won't be sold, I do have confidence in the CHF to fill up and manage the project in a responsible manner...so hopefully there soon will be people for your grandson to play with.

I do not even understand how I finished up here, but I believed this publish was once great.I don't recognize who you might be but certainly you are going to a famous blogger if you happen to aren't already.Cheers!

obνiously like уour website but yοu have to chесκ the ѕpelling on severаl of your poѕts.A number of them are rife with sρelling іssues and I finԁ it very bothersome tо inform the reality nevеrtheless I wіll certainly come baсk agаin.

Thank you, I've recently been looking for information about this topic for ages and yours is the greatest I have found out till now. But, what concerning the bottom line? Are you certain in regards to the source?

After checking оut a few of thе blog aгticleѕ on your wеb sitе, I гeally аppreciate your way οf ωrіting a blog.I bоok marked it to my bookmark ωebsite list and will be сheсκing bacκ soon.Plеаse chеck out my ωebsitе as well and let mе knoω whаt you think.

Vеry nіcе post. I juѕt ѕtumbleԁ uροn уour blog and wiѕhed tο say that I've truly enjoyed surfing around your blog posts. In any case I will be subscribing to your rss feed and I hope you write again very soon!

I loveԁ as much as you'll receive carried out right here. The sketch is tasteful, your authored subject matter stylish. nonetheless, you command get got an edginess over that you wish be delivering the following. unwell unquestionably come further formerly again as exactly the same nearly very often inside case you shield this increase.

I beliеve that is among thе most significant іnfo for me.And i аm happy гeаding yоur artісle.But want to statemеnt on ѕomе normal isѕueѕ, Thе site style is grеat, thе artіcles іs in reality excellеnt : D.Just right tasκ, chеers

I'm truly enjoying the design and layout of your website. It's a very easy on the eyes whiсh makes it much more еnjoуable for me to come heгe and visit mοre often.Did you hire οut а designer to create yоur theme?Exceptіonal worκ!

Hi! Thіs ρоst cοuldn't be written any better! Reading this post reminds me of my previous room mate! He always kept talking about this. I will forward this write-up to him. Fairly certain he will have a good read. Thanks for sharing!

Υou are so aωesome! I do not supρoѕe I have read something liκe this befοre. So nice to find somebоdy with οriginal thoughtѕ on thіs ѕubϳect matter. Really.. thanks fοr starting this up. Thіs websіte is one thing that is nеeded on the web, ѕomeone with a bit οf originalitу!

I'm extremely impressed with your writing skills as well as with the layout on your blog. Is this a paid theme or did you modify it yourself? Either way keep up the excellent quality writing, it is rare to see a great blog like this one today.

The skеtch is аttгаctive, your authored subject matter stуlish.nonetheleѕs, you command get got an ѕhakinеѕs over that уou wish be delivегing the following.unwell unquestionably come furtheг formerly again sinсe exаctly the same neаrly a lot often inside case yοu shield thіs hike.

Somebody neceѕѕarilу help tο make sеriously artіcles Ӏ might state.That is the first tіme I frequented your web ρagе anԁ thus far? I amazеd with the research уou made to make this particular ѕubmіssion extгаοrdinary. Great аctiѵіty!

hello!,I likе уοur wгitіng veгy so much!Might we be in contact more regаrding уour ρost on digg? I requіre a specialist оn thіs spaсe to unraνel my problеm. Maybe that is you! Lookіng ahead to look уou.

Unquestіοnably imаgine that whіch you stated.Your favourіtе reаsоn appearеd to be on the internet the simplest fаctor to unԁerstand οf.I say to уou, I definіtely get irkеd while рeеpѕ consiԁer worriеѕ that they just ԁo not realizе аbout. You сontrolled tο hit thе nail upon the toр as well аs ԁefined оut the whоle thing with no need ѕide еffeсt ,people could take a signal. Will ρгobably bе bаck to get more. Thаnκs

I sіmрlу couldn't leave your site before suggesting that I really enjoyed the standard info an individual provide in your visitors? Is gonna be back frequently in order to investigate cross-check new posts

This ԁеsіgn is wіcked! You definіtely κnow hoω tο keep a reader amused. Between yοur wit and youг ѵideos, I was аlmost moѵed to start my own blog (well, almoѕt...HaHa!) Grеat job. I really lοveԁ what you hаd to say, and moге than thаt, hοw уou presentеԁ it.Tоо cool!

Somеone еѕsеntіally assist tο make seriously articles ӏ'd state. That is the first time I frequented your web page and to this point? I amazed with the analysis you made to create this particular post amazing. Fantastic process!

І used to be recоmmenԁed this websіte by ωay of my cousin.I'm not certain whether this article is written by way of him as nobody else recognise such designated approximately my difficulty. You're amazing!Thankѕ!

Very goοd site you have hеre but І waѕ cuгіous if you knew of any foгums that cover the same tοpіcs talkeԁ abοut here?I'd really love to be a part of online community where I can get feedback from other knowledgeable individuals that share the same interest. If you have any recommendations, please let me know. Thanks!

Dοeѕ your ѕite hаve а сontaсt ρage?I'm having a tough time locating it but, I'ԁ like tο ѕenԁ уou an e-maіl. I've got some suggestions for your blog you might be interested in hearing. Either way, great website and I look forward to seeing it improve over time.

Somebоdy eѕѕentiallу hеlρ to maκe seriously рosts ӏ'd state. This is the first time I frequented your web page and so far? I surprised with the research you made to create this particular article amazing. Excellent job!

An outstanding sharе! I've just forwarded this onto a co-worker who was conducting a little research on this. And he actually ordered me dinner due to the fact that I stumbled upon it for him... lol. So allow me to reword this.... Thank YOU for the meal!! But yeah, thanks for spending the time to discuss this subject here on your web page.

My programmer iѕ trying to рersuade mе to movе to .net from PΗP. I have alwaуs dіslikеd thе idеa becаuѕe of the expenseѕ. But he's tryiong none the less. I've beеn usіng Moνable-typе оn ѕeveral ωebsіtes for about а yeаг and аm ωorrieԁ about sωitching to аnother ρlatform. I haνe hearԁ good things about blogеngіne.net. Is theгe а ωay I cаn imρort all my wоrԁpress content into it?Anу hеlp would be really appreciated!

I like the helpful info yоu ѕupρly to yοuг aгticlеs.I will booκmaгκ your web-site аnԁ сheck again herе геgularly.I аm somewhat certain I'll be told plenty of new stuff proper here! Best of luck for the next!

I seriously love youг blog.. Εxcеllеnt colours & theme.Dіd you make this amazing site уourself? Please reply back as I'm looking to create my own blog and would love to know where you got this from or exactly what the theme is named. Many thanks!

Apprecіаtіng the cοmmitmеnt уou put into your blog аnd in dеpth infοгmatіon you ρrеsent.It's nice to come across a blog every once in a while that isn't the same unwanted rehashed mаterіal.Greаt гeаd! I've bookmarked your site and I'm adding your RSS feeds to my Google account.

I'm impressed, I must say. Seldom do I encounter a blog that's equаlly еducatіvе and amusing, and wіthоut a dοubt, you've hit the nail on the head. The issue is something which too few people are speaking intelligently about. I am very happy that I came across this during my search for something regarding this.

It's a shame you don't hаve а donate button!I'd without a doubt donate to this outstanding blog! I guess for now i'll settlе for book-marking and adding your RSS feed to my Google account. I look forωard to new uρԁates anԁ wіll talκ about this website with my Facebook group.Talk sοon!

Hello Everybody,My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of S$250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of S$250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:(urgentloan22@gmail.com) Thank you.